I concur with Dr. Elder. My father, Paul Sarnoff, was fond of saying in his Brooklynese, “Sometimes da bulls gotta get fed and sometimes da bears gotta get fed. But da brokers eat wheddah da market goes up or down.”

Accentuate That

When I first went west, in the early-1980s, people made a big deal of my New York accent.

I shook my head, “What accent?”

One morning, after I’d been in Idaho for a while, I was on the phone with my dad and asked him about my brother Mitch being in New York City, down from his home in Rhode Island. What I heard, kinda shocked me, “He met ya muddah fer lunch at some jernt uptown.”

I was taken aback, “muddah,” “jernt,” what an accent!

I guess there’ll always be a little New Yorker in me.

For thirty years now, our approach at Options Hotline is that the only ones sure to profit from doing a lot of trades are the brokers.

Any way you say it, we strive for quality over quantity.

This week’s action should reveal some valuable information about the market’s intended primary direction.

Benjamin Graham is known as the “father of value investing.” Two of his books merit inclusion in your library, Security Analysis (1934, written with David Dodd) and The Intelligent Investor (1949).

When asked about the accuracy, or lack thereof, of Wall Street forecasts, Graham reflected on his studies. His results indicated you had the choice of tossing a coin and taking the consensus of expert opinion.

As to why that was, he answered that everybody in Wall Street was so smart that their brilliance offset each other, that all the information they know was already reflected in the level of stock prices, and consequently whatever happens in the future represents what they don’t know.

Gain some knowledge each day and use it. It helps you stay a step ahead of the crowd.

“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.”
— William Feather

Differing opinions make markets. The battle between bulls and bears is a daily struggle for control of price direction. Our method focuses on the human behavior (including computer-driven algorithmic trading) of buying and selling. That is what ultimately drives price action.

Combining the best of western technical analysis with our expertise in interpretation of Japanese charting techniques, we study the character of the behavior of of market price movement (positive, negative, or indecisive). We strive to identify which side has the advantage, along with when and where the balance of power is likely to shift, to help us stay a step ahead of the crowd.

“Everything should be made as simple as possible, but not simpler.”
— Albert Einstein*

Nowadays, market participants have a plethora of technical tools and studies at their fingertips. A common malady afflicting traders is paralysis from over-analysis. To break that stupor, we apply the Navy’s KISS principle (Keep It Simple, Stupid).

Find a handful of indicators you like best and use them.

Good luck in your trading!

Best regards,

Steve

* This quote may be misattributed to the great theoretical physicist and philosopher. I don’t want to exacerbate that, but it is quite widespread and suits him so well. We won’t quibble. The horse has left the barn, the train has left the station, the cat’s out of the bag (oh, I don’t like that one:-), etc. Take your pick. It could always be worse.

“Time is the most important factor of all and not until sufficient time has expired does any big move start up or down.”

— W.D. Gann, How to Make Profits in Commodities, 1941

Gann was a master technician. His work lives on.

My experience has shown that consideration of time cycles, including astronomic cycles, and applied mathematics often proves valuable in developing a complete picture of the vibrations of price movement.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.”
— Charles MacKay, Extraordinary Popular Delusions and the Madness of Crowds

Following the herd can be dangerous…in markets and in life. But recognizing herd mentality can also benefit you if you keep your head. As Warren Buffett famously advised, “Be fearful when others are greedy and greedy when others are fearful.”

This morning, SPY (S&P 500 ETF) continues its rebound on light trading volume. Buyers are following through from Friday’s strength, extending their immediate-term edge. But until proven otherwise by price, this may be considered a countertrend rally. Sellers are laying in wait.

Volume indicates the force behind a price move. Low volume questions the staying power of this action. Where can we expect sellers to be enticed?